Katara Hospitality v Guez & Anor

A power of attorney is strictly construed according to its express or necessarily implied authority and the purpose for which it was granted. A power to act in connection with completion of a transaction does not, without clearer language and supporting context, authorise an agent to renegotiate its commercial terms or impose a new and substantial liability on the principal. An authority to execute an English-law deed must itself be conferred by deed. Where co-obligors undertake a joint obligation in a deed, all intended joint obligors must validly execute it. A contract alleged to arise partly in writing and partly by conduct must be proved on the terms alleged, including the necessary agreement and consideration.

Katara Hospitality claimed approximately €65 million from Gerard Guez and Jacqueline Rose following its acquisition of interests in a hospitality business. Katara alleged that Raymond Visan had entered into a deed or contract on the defendants’ behalf, under powers of attorney, under which the defendants guaranteed repayment of Katara’s investment if specified distributions were insufficient.

The defendants disputed the nature and scope of the powers of attorney, the validity and effect of the deed, the alleged contract, and the estoppel case. The central issues were whether Visan had authority to agree the alleged undertakings and, alternatively, whether those undertakings were binding in deed or contract.

1. Power of attorney. The powers of attorney were not deeds under section 1(2)(a) of the Law of Property (Miscellaneous Provisions) Act 1989. Their formal language, witnessing and use of the expressions “power of attorney” and “lawful attorney” did not make it clear on their face that deed status was intended. They therefore operated as appointments in writing.
2. The powers were strictly construed, while having regard to their purpose and factual context. They authorised Visan to sign documents and take steps connected with completion of the agreed sale transaction. They did not authorise him to renegotiate the commercial bargain or impose the new €68.04 million undertaking, which had not been contemplated or agreed by the defendants.
3. In any event, the undertaking was not for the defendants’ benefit. The evidence established that Katara had required a personal guarantee from Visan, not a guarantee by the defendants.
4. Alternative grounds. If the power of attorney had been a deed, the deed’s obligations were joint. It was not binding because the intended joint obligors had not all validly executed it. The alternative contract case also failed because Katara did not prove an agreement on the alleged terms or a promise to proceed conditionally upon the defendants giving the undertakings.
5. The estoppel case did not require determination. The claim consequently failed.